1980 (1) TMI 114 - AT - Income Tax

Summary

Issues:
1. Rejection of petition for entertaining appeal under proviso to sub-s. 4 of s. 249 of the IT Act, 1961.
2. Denial of exemption from payment of tax by the AAC.
3. Interpretation of the substantive right of appeal and the impact of the amendment to s. 249(4) of the Act.

Detailed Analysis:
Issue 1:
The appeal pertains to the assessment year 1974-75, where the assessee, a private limited company, filed an appeal with the AAC of IT against the assessment made by the ITO. The AAC rejected the petition for entertaining the appeal under the proviso to sub-s. 4 of s. 249 of the IT Act, 1961. The AAC reasoned that the assessee had not paid the full tax amount due under s. 140A of the Act, indicating a deliberate withholding of tax payment. The AAC held that the assessee did not qualify for exemption from the operation of the proviso to sub-s. 4 of s. 249. The assessee challenged this decision, contending that the appeal should be heard on its merits.

Issue 2:
The primary grievance of the assessee was the failure of the AAC to hear the appeal on its merits and the denial of exemption from tax payment found payable based on the return of income. The assessee argued that the right to appeal against an assessment is a vested and substantive right that should not be undermined by procedural or technical grounds. The departmental representative supported the AAC's decision, emphasizing the mandatory nature of the provisions under sub-s. 4 of s. 249 of the Act. The dispute centered on whether the assessee had fulfilled the statutory requirements for admission of the appeal.

Issue 3:
The Tribunal delved into the substantive nature of the right of appeal and the impact of the amendment to s. 249(4) of the Act, which was inserted in 1975. It was established that the right of appeal is a vested right belonging to the assessee, accrued at the time of filing the return of income. The Tribunal emphasized that the amendment, effective from 1975, did not apply retrospectively to the assessee's case, preserving the vested right to appeal. Consequently, the Tribunal set aside the AAC's order, restoring the appeal for a fresh hearing on merits, affirming the assessee's right to appeal.

In conclusion, the Tribunal's decision favored the assessee, upholding the substantive right of appeal and directing a fresh hearing of the appeal on its merits. The judgment emphasized the preservation of vested rights and the inapplicability of the amendment to the assessee's case, ensuring a fair opportunity for the assessee to present its case before the AAC.